SNAFU: Situation Normal, All-FANGed Up

SNAFU: Situation Normal, All-FANGed Up: By Cliff Asness, AQR Capital

One common story making the rounds about stock market performance in 2015 is that it was very “narrow.” In particular that it was driven by the “FANG” stocks (Facebook, Amazon, Netflix and Google). This is sometimes mentioned simply as an interesting observation. But other times in exasperation. As in, “How can active management work in such a ‘narrow’ environment?”  As in, “Sure, the capitalization weighted indices were flattish but it was so ‘narrow’ that the average stock was down and therefore most people didn’t do so well.”

I could (and do) take issue with the theory behind these statements. For instance, sorry, the cap-weighted indices are what really...